ICN’s Panic Set to Face Off with Dissidents at Annual Meeting
There’s an old-fashioned corporate donnybrook going on at Milan Panic’s always-controversial ICN Pharmaceuticals Inc.
The 40-year-old ICN founded by Panic has become a serious business, developing and selling drugs worldwide. As of last week, the drug maker counted a market value of more than $2 billion. But Costa Mesa-based ICN has seen its stock stumble southward since 1998, down by half from a zenith of 50 a share back in early 1998.
That downward drift has raised the ire of a minority group of shareholders, who contend that ICN could be worth a lot more if the drug outfit was restructured,split up, even,as the “influence” of Panic, its 70-year-old chairman, chief executive and founder, is radically reduced.
The dissidents, led by Special Situation Partners Inc., are set for a showdown with Panic at ICN’s annual meeting May 30 at the company’s headquarters. Last week, ICN sued Swiss businessman Tito Tettamanti and his Special Situation Partners and others for allegedly filing a materially false and misleading proxy statement with the Securities and Exchange Commission.
In a rare area of agreement, Panic concurs with his critics that ICN’s market value should be higher. ICN’s $800 million in annual sales are about half of Irvine-based Allergan Inc.’s, but Allergan’s $10 billion market value as of last week is five times ICN’s.
Panic is pursuing a break up of ICN, including a spinoff of company jewel Ribapharm, a biotechnology unit. But dissidents say the company is dragging its feet. And they question the independence of the new units, which ICN still will own as much as 80% of.
In one of the less diplomatic statements probably ever filed with the Securities and Exchange Commission, the dissident slate said, “Our opinion is that the market’s persistent undervaluation of ICN results directly from ICN’s corporate structure,which leaves investors in ICN exposed to Eastern Europe risk,and from a lack of confidence in the leadership of ICN’s founder and Chairman, Milan Panic. We also believe that the incumbent board is not sufficiently independent of Mr. Panic and has not adequately represented stockholders’ interests. … We are of the view that the correct solution … is to divide ICN into three completely separate companies, each of which is independently managed and has a truly independent board of directors,with a much reduced role for Mr. Panic.”
The dissidents,who control almost 5% of ICN stock,have proposed a rival slate of directors for the three board seats that are up for election at the annual meeting. ICN’s board has 14 members.
“Yes, it’s only three seats but it is part of a long-term effort to win control of the company,” said one insider.
Panic has not taken kindly to his new rivals, alleging in a press release issued April 3 that one member of the dissident slate has “been involved in kickbacks, insider trading and political corruption,” and promising an investigation into the backgrounds of dissident slate members. That release was followed on April 16 by a second Panic-issued press release that retracted the statements after federal regulators raised their eyebrows.
As usual, there is lot more controversy swirling around Panic. ICN Pharmaceuticals itself is enduring a five-year-long federal grand jury investigation on insider trading practices and is currently fighting a civil lawsuit filed by the SEC in 1999. However, it should be noted that the grand jury recently decided not to indict any ICN officials, and the SEC recently dropped certain insider trading charges against Panic, opting instead to go forward only with charges that Panic made overly positive statements about ICN’s future back in 1995.
Panic, who was prime minister of Yugoslavia from 1992 through 1993 during a leave of absence from ICN, has prevailed in prior shareholder attempts to oust him.
Panic’s nominees include Ray Irani, chairman and chief executive of oil giant Occidental Petroleum Corp.; Kim Campbell, former Canadian prime minister, now Canadian consul general in Los Angeles; and Charles Manatt, the big Westside Los Angeles lawyer.
“What do these guys have in common with Panic?” asked one figure close to the boardroom battle.
As colorful as Panic’s proposed slate of directors are, they are perhaps outdone by existing ICN board members, who include Norman Barker Jr., 77, the former First Interstate Bank chairman; Birch Bayh, 72, the former U.S. Senator from Indiana; and Weldon Jolley and Roberts Smith, who both have been board members since 1960. n
Cole is a contributing columnist to the Los Angeles Business Journal.
